In this article, we will take a detailed look at the 12 Best NYSE Penny Stocks To Buy. For a quick overview of such stocks, read our article 5 Best NYSE Penny Stocks To Buy.
Markets wavered as latest data showed inflation in January 2024 was hotter-than-expected. But many analysts believe the markets overreacted as a single month’s data can only delay the Fed’s planned rate cuts for 2024. UBS Global Wealth Management on February 20 said it expects the Federal Reserve to begin cutting rates in June instead of May. UBS expects the first rate cut to be of 25 basis points.
“Given the upside surprises to both payrolls and inflation, we now expect the Fed to wait a bit longer before cutting rates,” UBS economists said in a note.
UBS is expecting 75 bps of cuts in 2024, lower than its previous estimate of 100 bps cuts.
The era of elevated interest rates might be prolonged amid a resilient labor market and stubborn inflation but sooner or later the Fed will begin to cut rates. That means good times might be coming for small-cap stocks or risky equities, including penny stocks, which have hitherto suffered as investors’ shunned smaller companies to find refuge in high quality stocks like Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and NVIDIA Corp (NASDAQ:NVDA). Historical data showed small-cap stocks perform exceptionally well in the first 12 months of the Fed’s first rate cut.
Lord Abbett in its December 2023 report took a detailed look at what the private investment management company called a dovish “pivot” of the Federal Reserve where it hinted that its interest rate cycle might have peaked. The Lord Abbett report also said small-cap companies perform well during rate cuts.
“Currently, in fixed income, we find the short duration space to be attractive and underallocated. A “bull-steepening” environment, like what we’ve seen when the Fed turns dovish on policy, favors short duration. At the same time, the normalized rate environment can make active, opportunistic credit an attractive diversifier with expected returns at current yields rivaling equities. Equities, particularly small caps, historically have done very well when inflation falls and in Fed rate-cut cycles while growth equities have done well when growth slows. Finally, a more normalized rate environment means less of the “financing for everyone” that was prevalent in the zero-interest-rate era. Going forward, quality companies with greater financial strength should be able to differentiate in terms of financial performance and demand a premium. All in all, the Fed’s dovish December pivot shocked the markets and set the table for better performance by risk assets in 2024. What a difference a week can make,” the report added.
Image: Depositphotos
Methodology
For this article we first used a stock screener to identify NYSE stocks trading under $5. From the resultant data set we picked 12 penny stocks with the highest number of hedge fund investors. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
12. Ginkgo Bioworks Holdings Inc (NYSE:DNA)
Number of Hedge Fund Investors: 20
While Ginkgo Bioworks Holdings Inc (NYSE:DNA) shares have lost about 42% over the past one year, 20 hedge funds tracked by Insider Monkey had stakes in Ginkgo Bioworks Holdings Inc (NYSE:DNA) as of the end of the third quarter.
According to Yahoo Finance data the stock’s one-year average price estimate is $3.08 while its stock price as of February 3 was $1.25. This shows the stock has an upside potential of 146%.
Ginkgo is a small company and unlike stocks like Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and NVIDIA Corp (NASDAQ:NVDA), which are highly popular among hedge funds, this stock does not have a high number of hedge fund investors.
11. E2open Parent Holdings Inc (NYSE:ETWO)
Number of Hedge Fund Investors: 20
Supply chain management platform company E2open Parent Holdings Inc (NYSE:ETWO) ranks 11th in our list of the best NYSE penny stocks to buy according to hedge funds. Earlier this month E2open Parent Holdings Inc (NYSE:ETWO) posted fiscal third quarter results. Adjusted EPS in the period came in at $0.04, meeting estimates. Revenue fell 5.2% year over year to $156.4 million, beating estimates by $2.14 million.
Out of the 910 funds tracked by Insider Monkey, 20 funds had stakes in E2open Parent Holdings Inc (NYSE:ETWO). The biggest hedge fund stakeholder of E2open Parent Holdings Inc (NYSE:ETWO) during this period was Snehal Amin’s Windacre Partnership which owns a $131 million stake in E2open Parent Holdings Inc (NYSE:ETWO).
Liberty Park Capital made the following comment about E2open Parent…
Read More: 12 Best NYSE Penny Stocks To Buy